Itaú BBA - Primary deficit of 3.4 billion reais in July

Macro Brazil

< Volver

Primary deficit of 3.4 billion reais in July

agosto 31, 2018

Short-term data improve

For the version with all charts and tables, please open the attached pdf file 

The consolidated public sector posted a primary deficit of 3.4 billion reais in July, which was better than our expectation (-9.2 billion) and market consensus (-7.0 billion). Regional governments posted a deficit of 1.8 billion reais (our call: -2.5 billion), while state-owned companies had a surplus of 1.1 billion reais (we estimated a deficit of 0.3 billion). In addition to better readings for regional government and state-owned companies, the main surprises vs. our forecast were bigger revenues and, in terms of spending, the fact that payments to the election finance fund should be registered next month (not this month, as we anticipated).  The consolidated primary deficit accumulated over 12 months receded to 1.1% of GDP in July from 1.3% in June.

The general government’s gross debt reached 77.0% of GDP, while the public sector’s net debt hit 51.4% of GDP in July. Notwithstanding still-negative annual primary results, the repayment by development bank BNDES of 130 billion reais to the National Treasury and historically-low real interest rates will moderate the advance in debt as a share of GDP in 2018. However, without reforms (such as the pension reform), fiscal readings will resume a worsening trend from 2019 onward.

Pedro Schneider
 

For the version with all charts and tables, please open the attached pdf file 



< Volver